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Surging electricity demand and renewable energy vulnerabilities are forcing Kenya back to expensive, fossil fuel-based thermal power, threatening higher consumer electricity bills and complicating national climate change commitments.
Kenya is facing a critical energy challenge as rapid economic expansion, industrialisation, and increased electrification drive electricity demand to unprecedented levels. According to the Energy and Petroleum Regulatory Authority (EPRA), peak electricity demand reached a historic high of 2,363.41 megawatts (MW) on the evening of Tuesday, August 5, 2025. Projections from the International Energy Association (IEA) indicate that demand is expected to grow at an accelerated annual rate of 6.5% between 2025 and 2027, nearly doubling the 3.2% growth pace recorded from 2018 to 2024. This surge is straining the national grid, which, despite being dominated by renewable sources, is struggling to keep pace, leading to a renewed and costly reliance on thermal power plants.
While Kenya prides itself on a power generation mix where renewables account for over 80% of electricity supplied, this green strategy is facing significant headwinds. Hydropower, which constitutes about 24% of the energy mix, is increasingly vulnerable to the effects of climate change, with recurrent and prolonged droughts significantly reducing water levels in key reservoirs along the Tana River. This unreliability forces the grid operator to turn to more expensive alternatives to prevent widespread power rationing. Geothermal energy remains the largest and most reliable source, providing approximately 40% of the country's power. However, the development of new geothermal capacity is a capital-intensive and lengthy process that is not keeping up with the rapid demand growth.
To bridge the immediate gap, Kenya is increasingly dispatching power from thermal plants operated by both the state-owned Kenya Electricity Generating Company (KenGen) and various Independent Power Producers (IPPs). These plants, which run on imported heavy fuel oil and diesel, are the most expensive source of electricity in the country, costing over KSh 25 ($0.20) per unit—more than double the cost of geothermal and four times that of hydropower. This dependence has a direct financial impact on consumers through the Fuel Cost Charge (FCC) component of their monthly electricity bills. In November 2025, EPRA announced an increase in the FCC to KSh 3.81 per kilowatt-hour (kWh), contributing to a total price hike of KSh 4.78 per unit for the month. Data from the Auditor-General has previously highlighted that power purchased from IPPs, particularly thermal, is significantly more expensive than that from KenGen.
The government's long-term strategy includes major infrastructure projects like the High Grand Falls Dam on the Tana River, which is planned to generate an initial 500 MW of hydropower. However, the KSh 337 billion project has faced significant delays, including a contract termination in July 2025, before being revived in September 2025 for a fresh planning phase. Such long-term solutions, while crucial, do not address the immediate shortfall, leaving thermal power as the default stopgap measure. This pivot to fossil fuels creates a direct conflict with Kenya's ambitious climate goals. In its latest Nationally Determined Contribution (NDC) submitted in 2025, Kenya committed to reducing greenhouse gas emissions by 35% by 2035 and moving towards 100% renewable electricity generation. An extended reliance on thermal power could jeopardise these international commitments and undermine the country's status as a regional leader in clean energy.
Kenya stands at a crossroads, balancing the urgent need for reliable power to fuel its economic ambitions against the high cost of thermal energy and its environmental commitments. The situation is further complicated by high system losses—estimated at over 23% due to technical faults and electricity theft—which exceed the regulator's allowable threshold and add to the financial pressures on the national utility, Kenya Power. As policymakers navigate this complex landscape, the choices made in the coming months will have lasting implications for the cost of living for ordinary Kenyans, the competitiveness of local businesses, and the sustainability of the nation's development path.